There will be a lot of talk about holding big banks and Wall Street to account in coming days, as the Senate takes up the question of how to overhaul a finanial services industry that is currently defined by a toxic combination of blind greed, unsustainable speculation and "too-big-to-fail" threats not just to the economy but to the stability of this country's democratic experiment.
Most of the measures of success or failure when it comes to regulating the big banks, the payday lenders, the credit-card sharks and the Federal Reserve will be made by Republicans who are taking their marching orders from Wall Street lobbyists and Democrats who are inclined toward compromises that will keep the corporate campaign dollars flowing their way in a tough election season.
Who to trust?
How about someone who was complaining about the speculators before their crashed the economy in the fall of 2008?
How about someone who voted against the bank bailout?
How about someone who has demanded accountability from the Fed not just in recent years but across the past two decades?
How about someone who, as a lonely member of the House back in 1999, voted against deregulating the the financial services industry in a manner that set the stage for the orgy of greed, the boom-and-bust economy and the predictable meltdowns?
How about Bernie Sanders?
What does the Vermont independent say?
He begins by arguing, correctl, that the great mass of Americans want a lot more that Republican talking points and Democratic compromises.
"Disgust at Wall Street is profound," says Sanders. "The American people want us to change in a very profound way how Wall Street functions, and Congress must deliver."
What's the Sanders Standard profound change of how Wall Street functions?
The senators says the Senate should amend a tepid financial reform bill to:
1. Break Up Huge Banks.
The four biggest U.S. banks - Bank of America, Citigroup, JPMorgan Chase and Well-Fargo - issue two-thirds of all credit cards, write half the mortgages and control nearly 40 percent of bank deposits in the United Sates. "We must break up these behemoths because of the incredible economic power they exert through their concentration of ownership," Sanders said. "It is simply not acceptable that a small handful of giant financial entities can exert such enormous influence over the economic well being of hundreds of millions of Americans."
2. Make Wall Street Part of the Real American Economy.
"With rampant unemployment and when small- and medium-size businesses are unable to obtain affordable credit, it is insane that our largest financial institutions continue to trade trillions in esoteric financial instruments which makes Wall Street the largest gambling casino in the world," he said. Instead, Sanders said, we need to create millions of new jobs by rebuilding our manufacturing base, transforming our energy system and addressing our transportation and infrastructure crisis. We need to make sure that businesses get the credit they need to expand and create employment.
3. Cap Credit Card Interest Rates.
Millions of middle-class Americans who pay their bills on time are being charged interest rates of 30 percent or more. "That is not only obscene but, according to every major religion, immoral. Banks cannot be allowed to engage in usury and charge outrageous interest rates," Sanders said. He will offer an amendment that would cap interest rates for private banks at the same level federal law allows for credit unions; 15 percent except under exceptional circumstances.
4. End Fed Secrecy.
During the bailout, large financial institutions received trillions of dollars in near-zero interest loans. "Who received those loans and under what terms? The Fed won't say. Did some of them turn around and, in a mammoth welfare scam, invest that Fed money in government treasury bonds at 3 percent or 4 percent interest rates? The Fed isn't telling. It's time we had transparency at the Fed so that the American people know what our central bank is doing with taxpayer dollars," Sanders said.
That's the Sanders Standard.
It's the right one to begin with.
Senators who are not on board for these amendments, be they Democrats or Republicans, should be expected to rise to it.
But they should not stop there. Senators who are serious about reform should embrace a host of specific proposals developed by top economists and analysts such as Rob Johnson, the former chief economist for the Senate Banking Committee; Robert Kuttner, the former chief investigator for the Senate Banking Committee; Dean Baker, the co-director of the Center for Economic and Policy Research; and former Secretary of Labor Robert Reich.
Under the auspices of theAgenda Project's campaign to "Repair the Foundation of Our Economy," they argue with regard to proposed financial services reforms that:
Nineteen months after the most devastating financial crisis since the Great Depression, our financial system remains at risk. Neither the bill passed earlier this year by the House, nor the one currently under consideration in the Senate would have prevented the crisis. Without serious restructuring, they will not prevent a future crisis.
Sound financial markets are the bedrock of a strong economy. Over the last decade, under both Democratic and Republican leadership, our financial sector moved away from core market principles - transparency, competition, free flow of information and the essential discipline of failure - that allowed the US economy to thrive. Restoring the integrity of our financial markets and providing the foundation for economic recovery, requires re-committing to these principles.
We, the undersigned, call on you to fulfill the responsibilities of your position by joining together in non-partisan cooperation to pass legislation that AT A MINIMUM would have prevented the crisis we just endured. Such legislation must include ALL of the following reforms or be considered incomplete:
1. Eliminates a perpetual system of government sponsored corporate bailouts financed by the government or private industry.
2. Increase minimum capital requirements for banks to no less than 8 percent. Apply additional risk-weighted capital requirements for: a) risk concentration, b) significant interconnectedness with other financial institutions and c) illiquidity which assumes a decline in collateral values. Create standard metrics for these variables.
3. Require on balance sheet reporting of all liabilities with disclosure of related material information including all contingent claims (including but not limited to swaps, SIVs and VIEs). Provide a private right of action for failure to comply and for knowingly aiding and abetting securities fraud.
4. Require all standardized derivatives to be traded over exchanges and central clearinghouses with pricing transparent to market participants include a strong presumption that most existing OTC transactions would be standardized. Require all inter-bank and inter-dealer contingent claims (including but not limited to derivative and swap transactions) that cannot be standardized to be reported on a daily basis to a regulated transparent clearinghouse. Mandate significant and consistent margin and regulatory requirements across standardized and OTC contingent claim transactions.
5. Create standardized Pooling and Servicing Agreements and mandate the timely availability of electronically usable loan level information for asset backed securities, covered bond and similarly structured transactions prior to sale. Provide a private right of action and personal liability for sponsors of securitized underwritings.
6. Establish a timeline for the resolution of Fannie Mae and Freddie Mac.
7. Mandate that credit rating agencies be subject to the same legal standards as other market participants.
8. Mandate a separation of the roles of Chairman of the Board and CEO for regulated financial institutions.
Without these reforms, our economy remains at risk.
The debate over financial services reform will get intense, and complex at times.
But the measure of real reform is easy.
Begin by meeting the Sanders Standard.
Then get serious about the Agenda Project proposals.
Do that, and the Senate is talking about real reform.
Anything less and the Senate is just talking.